Annuity Income

Written by Jacey Harmon
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Annuities provide income for annuitants once the annuity is converted into a payment stream. An annuity can be funded with a single payment or through periodic payments. When the desired value of the account is reached, the annuity is then converted into an income stream. The income stream can last for a period of months or for the remainder of the annuitant's life.

Depending on how the annuity is used will determine if the income provided from the annuity will be treated as taxable income. If the annuity was used to fund retirement with non taxed money, the income stream will be treated as taxable income. If the annuity is providing payments due to a settlement from a personal injury lawsuit, the payment stream is not treated as taxable income. A qualified tax professional will be able to help with understanding how your payments will be treated.

Accessing Future Income Payments

Annuities are very strict plans in which, once converted, the money can no longer be accessed. Times may occur when access to the funds is a necessity or desire. Starting a business, eliminating debt, or covering medical expenses are all reasons why a person may need access to future income.

To access future payments, you need to get an advance. The company that issues the annuity and payments will not give you an advance on your payments. Instead, you must rely on third parties to provide for advanced funding. These businesses will pay a percentage of pledged payments in exchange for those payments. Receiving advanced funding may be a big decision; consulting with both a financial advisor and funding specialist is recommended when considering this option.


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